The U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. (Wayfair) has forever changed the landscape of nexus for state sales tax purposes. Over the prior six months, most states have enacted laws or issued administrative guidance regarding their intent to enforce sales and use tax remittance requirements in light of this ruling. The chart below provides a high-level summary of various states’ most recent guidance regarding their economic nexus thresholds and dates of sales tax enforcement associated with Wayfair.
Note that most states have adopted filing thresholds based on total sales rather than taxable sales.
While these thresholds apply for sales tax purposes, it’s important to note that the Wayfair ruling has broader implications. If no federal pre-emptive remedies apply, a state needs only sustain that taxpayers have conducted activity sufficient to generate Due Process and Commerce Clause nexus to assert its tax jurisdiction. We elaborate on these and related concepts in our previous BKD Thoughtware® coverage of the Wayfair decision:
While a few states already have economic nexus standards in place for income and franchise tax, no constitutional limitations exist to prevent the remaining states from applying the same economic nexus standards considered in Wayfair to income and franchise tax.
As most states are applying their economic nexus regimes prospectively, now is an ideal time to review your company’s current sales and use, income and franchise tax return filings and avoid state tax exposure associated with unfiled returns. Reviewing nexus activity for prior years also may bring to light previously unknown exposure, with the opportunity to ameliorate the situation through voluntary disclosure or other proactive approaches.
For more information, contact Jeff or your trusted BKD advisor.